Financial stocks fall on Bernanke, Beige Book

GregMorcroft

An earlier version of this story incorrectly reported that Morgan Stanley had received a notice Tuesday from the SEC. The story has been corrected.

SAN FRANCISCO (MarketWatch) — Financial stocks fell with the broader market falling Wednesday after the Federal Reserve gave no sign of further quantitative easing measures and a somewhat improving economy.

The Financial Select Sector SPDR ETF
XLF, +0.21%
which tracks the financial stocks in the S&P 500 index
SPX, +0.59%
closed down 0.4%, for a 5% gain in February. The SPDR S&P Bank ETF
KBE, +0.14%
also fell 0.4%, rising 5.5% for the month of February.

In testimony before the House Financial Services Committee, Federal Reserve Chairman Ben Bernanke said the Fed needs to monitor differing signals in the economy between improved unemployment numbers and final demand indicators. Read more on Bernanke testimony.

Later, the Fed released its Beige Book survey, showing that residential real estate markets and banking conditions have shown a moderate expansion in all Fed districts except New York. Read more on the Beige Book.

Prior to Bernanke and the Beige Book, financial stocks had traded higher.

Insider probe targets Goldman exec

(3:34)

Goldman Sachs is being drawn further into the government's insider-trading investigation.

Goldman Sachs Group Inc.
GS, +0.17%
shares closed down 1.7% after the company reported in a regulatory filing that it may be charged with civil violations for disclosure issues in the mortgage-backed securities markets.

On another front, The Wall Street Journal reported that David Loeb, a managing director, is the latest Goldman executive to be investigated in an ongoing insider-trading probe. The Journal cited sources familiar with the situation.

In other sector news Wednesday: Average cash bonuses for securities industry workers in New York City is expected to fall 14% in 2011, according to a report released by state Comptroller Thomas DiNapoli.

“Cash bonuses were down in 2011, reflecting a difficult year on Wall Street,” DiNapoli said. “Profits were down sharply and securities firms in New York City resumed downsizing in the second half of the year.”

The average cash bonus declined by 13% to $121,150 in 2011. The average bonus fell a bit less than the total cash bonus pool because the pool was shared among fewer workers than in 2010, the comptroller said.

DiNapoli’s report also suggested that profits for New York City broker/dealer operations for NYSE members were likely less than half of 2010’s $27.6 billion.

On the data front, the U.S. government said the economy grew 3% in the fourth quarter, faster than originally reported and stronger than economists had forecast, mainly because of increased commercial construction, higher consumer spending and lower imports. Read more on GDP.

It’s the quickest rate of growth seen in gross domestic product in a year and a half. The Commerce Department initially estimated a 2.8% growth rate for the final three months of 2011.

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